The latest results are indicating that the manufacturing expansion bounced back notably from last months weak reading rising to 14 from a level of 1 a month earlier while the employee index increased to 17 and the prices paid for raw materials increased to 16.

The following chart plots the seasonally adjusted Composite index since 2001 with the solid red line indicating the threshold between expansion and contraction.

Since the middle of 2008 though, two federal government sponsored “extended” unemployment benefit programs (the “extended benefits” and “EUC 2008” from recent legislation) have been picking up claimants that have fallen off of the traditional unemployment benefits rolls.

Currently there are some 3.92 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.30 million people that are currently counted as receiving traditional continued unemployment benefits, there are 7.41 million people on state and federal unemployment rolls.

Meanwhile, the NARs chief economist Lawrence Yun is again dusting off the old "turnaround is on its way" jargon while he notes that some markets are seeing a notable pickup in contract signings.

"Some markets have made a rapid turnaround, going from soft activity to contract signings rising by more than 30 percent from a year ago, including areas such as Hartford, Conn.; Indianapolis; Minneapolis; Houston; and Seattle."

The following chart shows the seasonally adjusted national pending home sales index along with the percent change on a year-over-year basis as well as the percent change from the peak set in 2005 (click for larger version).

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage declined 11 basis points to 4.46% since last week while the purchase application volume declined 3.0% and the refinance application volume dropped 2.6% over the same period.

Rates now are clearly trending down having, more of less, declined continually for the last few months.

Given that we are nearing the end of the Feds QE2 intervention, it will be interesting to see how long rates trend in the next few months.

In any event, the purchase application volume remains near the lowest level seen in well over a decade while refinance activity continues to bounce around a bit.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).

Today’s release of the S&P/Case-Shiller (CSI) home price indices for April reported that the non-seasonally adjusted Composite-10 price index increased 0.75% since March while the Composite-20 index incresed 0.66% over the same period with both measures continuing to decline notably since last year.

The latest CSI data clearly indicates that the price trends are experiencing a bit of a lift into the typically more active spring season and, as I recently pointed out, the more timely and less distorted Radar Logic RPX data is continuing to capture rising prices driven primarily by seasonality.

It's important to note though that both composite indices are continuing to show notable year-over-year declines, a weak sign indeed.

The 10-city composite index declined 3.08% as compared to April 2010 while the 20-city composite declined 3.96% over the same period.

Topping the list of regional peak decliners was Las Vegas at -58.91%, Phoenix at -55.87%, Miami at -51.23%, Detroit at -50.62% and Tampa at -46.88%.

Additionally, both of the broad composite indices show significant peak declines slumping -32.60% for the 10-city national index and -32.77% for the 20-city national index on a peak comparison basis.

The following chart (click for larger version) shows the percent change to single family home prices given by the Case-Shiller Indices as compared to each metros respective price peak set between 2005 and 2007.

The following chart (click for larger version) shows the percent change to single family home prices given by the Case-Shiller Indices as on a year-over-year basis.

The following chart (click for larger version) shows the percent change to single family home prices given by the Case-Shiller Indices as on a month-to-month basis.

Additionally, in order to add some historical context to the perspective, I updated my “then and now” CSI charts that compare our current circumstances to the data seen during 90s housing decline.

To create the following annual and normalized charts I simply aligned the CSI data from the last month of positive year-over-year gains for both the current decline and the 90s housing bust and plotted the data side-by-side (click for larger version).

The “peak” chart compares the percentage change, comparing monthly CSI values to the peak value seen just prior to the first declining month all the way through the downturn and the full recovery of home prices.

Today's release of the Household Misery Index showed that the level of misery declined in April dropping 0.02% from March but still remained near the peak for this cycle and nearly the highest level seen in 30 years while on a year-over-year basis, misery declined for the fifth consecutive month dropping 0.23% since April 2010.

Back in the 1970s and 80s the “Misery Index” was popularized as a measure that accurately captured the misery and malaise of the time.

The original Misery Index was a bit too simplistic as it only captured the severity of the two main vexing issues of the time, unemployment and inflation.

Today, inflation, as measured by the annual rate of change of the CPI-U, is not a significant source of financial misery.

Of course, households on fixed income may dispute that fact and many have argued that CPI itself does not accurately capture “real” inflation as it has never accounted for the ridiculous increasing costs of housing and other essentials so for the sake of formulating a new misery index, inflation will factored out.

Another key to formulating a new misery index is to specifically target “household” misery as opposed to including data that might target the miserable state of affairs of the federal government or corporate misery.

The Household Misery Index captures the following trends and weights them equally:

1. The U-3 unemployment rate2. YOY percent change of the 10-Year moving average of total nonfarm payrolls3. YOY percent change of the 10-Year moving average of “real” personal income4. YOY percent change of the 10-year moving average of “real” S&P 500

The unemployment rate captures the misery associated to the threat and severity of a potential bout of unemployment while the annual change of the 10 year moving average of non-farm payrolls captures a more fundamental sense of the overall job market.

The annual change to the 10 year moving average of “real” (adjusted with CPI-U) personal income captures a household’s long term sense of income prospects.

The annual change to the 10 year moving average of “real” (adjusted with CPI-U) S&P 500 captures a household’s long term sense of typical investment prospects.

Unfortunately, all home price series are simply not long enough to include in the formulation but there may be alternative measures that can be included in the future.

This is a notable improvement for misery and if the past is to be taken to be even just a crude guide, the level of household misery should continue to steadily improve in the coming months.

The current Radar Logic 25 MSA Composite data reported on residential real estate transactions (condos, multi and single family homes) that settled as late as April 22 and averaged for the month indicates that with increasing spring transactions has come increasing prices (the typical trend) with the national index increasing 1% since March but still remaining 5.45% below the level seen in April 2010.

The Radar Logic index will likely be capturing an uptrend in prices from now until mid-summer when transactions generally start to turn down again.

Look for tomorrow's S&P/Case-Shiller home price report to reflect this trend though to a lesser degree due to its three month rolling-average nature with prices flat to moderately higher.

On a year-over-year basis real GDP increased 2.33% while the quarter-to-quarter non-annualized percent change was 0.48%.

The latest report reveals an notable decline in non-residential fixed investment with non-residential structures declining at a rate of 14.8% from the fourth quarter 2010 while residential fixed investment also declined falling at a rate of 2.0% over the same period.

Note that the BEA has yet to take down their estimates for Q2 residential fixed investment which still sits at the lofty level of a supposed 25.7% quarter-to-quarter change... not likely.... look for that figure to be revised down in coming releases impacting the anemic "final" Q2 2010 results.

Government spending declined notably with the national defense component declining at a rate of 11.8%.

Thursday, June 23, 2011

The latest release of the Moody’s/REAL Commercial Property Index showed a notable monthly decline of 3.7% between March and April suggesting that the nation’s commercial property markets are continuing to slump through a tremendous downturn that has seen prices down some 48.95% since the peak set in October 2007.

It's important to note that the index has fallen to an all time series low clearly indicating that the nation's CRE markets have now followed the residential markets into double-dip territory.

The Moody’s/REAL CPPI data series is produced by the MIT/CRE but is noted to be “complimentary” to their alternative transaction based index (TBI) as it is published monthly and is formulated from a completely different dataset supplied by Real Capital Analytics, Inc and Real Estate Analytics LLC.

The CFNAI is a weighted average of 85 indicators of national economic activity collected into four overall categories of “production and income”, “employment, unemployment and income”, “personal consumption and housing” and “sales, orders and inventories”.

The Chicago Fed regards a value of zero for the total index as indicating that the national economy is expanding at its historical trend rate while a negative value indicates below average growth.

A value at or below -0.70 for the three month moving average of the national activity index (CFNAI-MA3) indicates that the national economy has either just entered or continues in recession.

It’s important to note that at -0.19, the current three month average index value is indicating that contraction may be in the offing.

These results, continue to indicate that the nation's housing markets are firmly entrenched in a double-dip and come fully in-line with the other pitiful housing data-points I have outlined in past months.

Since the middle of 2008 though, two federal government sponsored “extended” unemployment benefit programs (the “extended benefits” and “EUC 2008” from recent legislation) have been picking up claimants that have fallen off of the traditional unemployment benefits rolls.

Currently there are some 3.95 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 3.48 million people that are currently counted as receiving traditional continued unemployment benefits, there are 7.44 million people on state and federal unemployment rolls.

The BLS considers a mass layoff event to be a condition where there are at least fifty initial claims for unemployment insurance originating from a single employer over a period of five consecutive weeks.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage increased 6 basis points to 4.57% since last week while the purchase application volume declined 2.8% and the refinance application volume dropped 7.2% over the same period.

Rates now appear to be trending down having, more of less, declined continually for the last few months.

Given that we are nearing the end of the Feds QE2 intervention, it will be interesting to see how long rates trend in the next few months.

In any event, the purchase application volume remains near the lowest level seen in well over a decade while refinance activity continues to bounce around a bit.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).